Frito Lays Case Analysis

Introduction:In the mid-eighties Frito-Lay’s Dips had become a highly profitable product line with sales of $30 million in 1981, growing to $87 million in 1985. In late 1986, Marketing Director Ben Ball, and Product Manager Ann Mirabito had completed the planning review for the Frito-Lay line of dips. A major issue at the planning meeting was where, and how, to further develop Frito-Lay’s Dips. Two divergent viewpoints developed; that the dip line should be more aggressively promoted in its market segment, and that Frito-Lay should actively pursue the “vegetable dip” category. The company had recently introduced a shelf-stable, sour cream-based French onion dip, the first cream-based dip for Frio-Lay, and some executives felt the dip could provide a bridge to the vegetable dip category. The Frito-Lay executives had yet to decide which direction to emphasize in 1987. Expense budgets would need special consideration, and more aggressive marketing would require higher marketing investment or at least a relocation of funds. Another consideration was to preserve the gross margin and profit contribution of dips. Case Problem:

Within a span of two years, 1984 and 1985, competition has increased in the dip market. New products have been introduced and firms are spending more in advertising these products. There are large, well-financed firms that have started to aggressively pursue this market. Major Issue:

Which geographic market should Frito-Lay expand into first? With its largest and main market becoming saturated, namely the United States market, it is time to search for new markets abroad. The company should be trying to capitalize from economies of scale and develop a global brand image to compete with local competitors. Case Issues/Application of Theory:

Dips have become increasingly popular in recent years due to their convenience and “grazing” trends in the United States. The dip category in general is substantially fragmented and essentially difficult to...

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Problem Statement: Should Frito-Lay’s, the sales leader in the shelf-stable dip category, take an aggressive approach promoting its “chip dips”, or pursue the vegetable dip category?
Facts:
Market Conditions: FLD’s 1985 market share was 32.7% with sales of $135 million in that year. Total sales for the industry topped $620 million. (Refer to Attachment 1)
Industry research shows that dip sales are growing at 10% per year. However this growth in 1985 is due to price increases throughout the industry. It is relevant to note that all growth was a result of cheese-based dips sales.
67% of total dip sales are linked to salty snack usage. The popularity of Mexican food has fueled the growth of cheese-based dips as well. In 1985 85% of cheese-based dips sold was linked to chip use.
Competitive Situation: A number of new products have been introduced between 1984- and present day. While FLD maintains the largest market share, other major players introduced shelf-stable dips such as Kraft and Velveeta.
Total dollar sales dropped for FLD in 1985 due largely in part to increased activity among competitors.
Large, well-financed companies are beginning to advance in the dip market. Campbell Soup has introduced a nacho...

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Frito-Lay is a division of PepsiCo, a New York-based diversified consumer goods and services firm. Frito-Lay is a nationally recognized leader in the manufacture and marketing of snack foods. The company’s leaders in the snack industry include potato chips, tortilla chips, cheese puffs and pretzels. Frito-Lay not only had net sales in 1985 of three billion but also captured about thirty three percent of the snack foods sold in the United States.
When Frito-Lay first got into the dip industry they introduced two dips, the Jalapeno Bean Dip and Enchilada Bean Dip. These two dips were generally viewed as a complement to the companies Fritos corn chip. In 1978 a Picante Sauce Dip was introduced to complement the newly introduced Tostitos chips.
These three dips were the only Frito-Lay dips sold until 1983. The growing dip popularity accelerated the extension of the dip product line in 1983. In the early 1984 Frito-Lay introduced a number of cheese-based dips all of which were produced in the same nine ounce cans as the Mexican dips were sold. According to the marketing director Ben Ball “Cheese dips were a extension of Frito-Lay’s tortilla chip business and were a response to the Mexican food phenomenon sweeping the country.”
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Frito-Lay, Inc has been developing multigrain chips since the early 1970s. It is a worldwide leader in the manufacturing and marketing of snack chips. It is capturing nearly one-half of the retail sales in the United States snack chips market. Frito-Lay knew that a healthier option was appealing to consumers and that this healthier option had proper time to be introduced, but the market was not ready for it yet. Product research and development is carried out in 1980s and it was found that consumers are expecting multi grain rectangular chips with ridges. So, sun chip is introduced in late 1990. It is a crispy textured snack chips with a mixture of wheat, corn, rice and oat flours. (Sun chips.n.d.). Fritolay has invested a huge capital in sun chip products and so they did pre market test before introducing the product into market. This test has shown positive result as more consumers got attracted. (Fritolay corporation.n.d.).
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Specialisation and division labour
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Frito-Lay is a brand known by almost every consumer in North America. With products being exported to 79 countries around the globe and accounting for almost 62% of the salty snack industry in North America, it is certainly a powerful brand. Yet there are still many issues the company faces, both internally and externally. Some external problems the company faces are the threats of new entrants, threats of substitutes, and intense rivalry among competitors. Some internal problems the company faces are the rigid capital structure, falling profits, and increasing pressure from consumers to reduce their adverse environmental impacts.
Eco-Innovations Consulting Firm has come up with a sustainable strategy for the company to put forward in the future. Focusing on pollution prevention, we recommend for the company focus on four main areas:
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Table of Contents
Purpose and Overview 3
Analysis of Our Past and Current Situations 3
External Opportunities We Could Exploit 4
External Threats That May Impeded Success 4
Internal Strengths on Which to Capitalize 4
Internal Weaknesses to Overcome 4
Assumptions on Which the Strategies are Based 5
Marketing Strategies That Emerge from the SWOT 5
Summary and Request for Action 5
References 7
CaseAnalysis of Frito-Lay Company
Purpose and Overview
The purpose of this analysis is to determine the most viable marketing opportunity for the Frito-Lay’s Dips product line. Frito-Lay can continue to develop the chip dip market, or as I will recommend, a strategy to spur a foray into the vegetable dip market with our new sour cream-based dip. This analysis contains external opportunities and threats, internal strengths and weaknesses, and assumptions. These strengths, weaknesses, opportunities, and threats (SWOT) serve as the foundation for which my marketing strategy recommendations will be based....